Dow Jones futures will open on Sunday evening, along with S&P 500 futures and Nasdaq futures, with the banking crisis still in focus. A stock market rally attempt is ongoing, but the indexes have been volatile while breadth has been narrow.

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The major indexes rose modestly for the week, but came far off weekly highs. The Russell 2000 hit 2023 lows with bank stocks, but small caps and banks edged up for the week.

The rally attempt has relied heavily on big-cap Nasdaq stocks. Apple stock,  Microsoft (MSFT), Tesla (TSLA), Regeneron Pharmaceuticals (REGN), MercadoLibre (MELI) and Palo Alto Networks (PANW) are Nasdaq 100 stocks that are holding up well.

REGN stock gapped up into a buy zone late in the week on positive drug trial news. Apple (AAPL) and Microsoft are just above buy points while Palo Alto is just below an entry. MercadoLibre and Tesla stock are holding key support levels, not far from being actionable. All boast strong relative strength lines. MercadoLibre and PANW stock are on IBD Leaderboard. AAPL stock is on SwingTrader. MSFT stock is on the IBD Long-Term Leaders list. MELI stock is on the IBD 50.

Just because individual stocks are possible buys doesn’t mean investors have to act on them. This market rally attempt still needs to confirm its uptrend.

Watch out for another round of bank headlines, though weekend news may not be quite so hectic as the prior two. The FDIC would like to find a buyer for some or all of SVB Financial’s Silicon Valley Bank. Will there be any positive or negative headlines on First Republic (FRC), PacWest Bancorp (PACW) or Deutsche Bank (DB), or more decisive action from regulators or policymakers? On Friday, many banks rebounded higher, but still suffered sharp-to-massive losses for the week. Also, concerns expanded to Deutsche Bank (DB), while Wall Street giants such as JPMorgan Chase (JPM) and Morgan Stanley (MS) undercut 2023 lows.

The video embedded in this article discusses the week’s market action in depth, while also analyzing MELI stock as well Meritage Homes (MTH) and PagerDuty (PD), the two most recent IBD Stock Of The Day selections.

Dow Jones Futures Today

Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Stock Market Rally

The stock market rally settled with solid gains for the major indexes but with big swings along the way.

The Dow Jones Industrial Average rose 1.2% in last week’s stock market trading. The S&P 500 index climbed 1.4%. The Nasdaq composite bounced 1.7%. The small-cap Russell 2000 edged up 0.3%.

U.S. crude oil futures rose 3.5% to $69.26 a barrel last week, falling on Friday but coming well off intraday lows. Copper prices popped 4.8% last week, but snapped a six-day win streak on Friday.

The 10-year Treasury yield dipped 2 basis points to 3.38%, hitting a six-month low of 3.295% intraday Friday. The two-year Treasury yield slumped 7 basis points to 3.78%, after tumbling to 3.555% Friday morning.

The Federal Reserve raised rates by a quarter point on Wednesday and signaled just one more hike remains. Still, markets overwhelmingly expect a pause in May, followed by several Fed rate cuts starting in July. The Fed rate hike outlook depends greatly on whether bank contagion is contained. Even if the crisis ends, banks are likely to rein in lending further, slowing the economy and reducing the need for additional Fed tightening.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.4% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 2.7%.  The iShares Expanded Tech-Software Sector ETF (IGV) advanced 1.7%, with MSFT stock a major component. The VanEck Vectors Semiconductor ETF (SMH) also climbed 1.7%, but backed off an 11-month high.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 2.5% last week while ARK Genomics ETF (ARKG) edged up 0.5%. Tesla stock is a core holding across Ark Invest’s ETFs, but so are big weekly losers Coinbase (COIN) and Square-parent Block (SQ). Indeed, Cathie Wood sold a slice of TSLA stock Thursday to buy up more COIN and SQ.

SPDR S&P Metals & Mining ETF (XME) rose 1.6% and the Global X U.S. Infrastructure Development ETF (PAVE) 1.5%. U.S. Global Jets ETF (JETS) slid 1.3%, extending huge recent losses. SPDR S&P Homebuilders ETF (XHB) edged up 0.4%. The Energy Select SPDR ETF (XLE) climbed 1.2%. The Health Care Select Sector SPDR Fund (XLV) advanced 1.1%, with REGN stock an XLV holding.

The Financial Select SPDR ETF (XLF) rose 1 cent last week after hitting a five-month low intraday Friday. JPM stock and Morgan Stanley are notable XLF holdings. The SPDR S&P Regional Banking ETF (KRE) edged up 0.2%, after skidding to the lowest levels since late 2020. First Republic and PACW stock are among the many KRE components.

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Market Rally Analysis

The major indexes had solid weekly gains, building on the prior week’s upside reversals. But the stock market rally attempt had a series of big volatile swings and divergent action. On Wednesday and Thursday the indexes ran sharply higher but fell back from resistance.

Stocks reversed sharply lower Wednesday following the Fed rate hike and comments from Treasury Secretary Janet Yellen. On Thursday, the big-cap indexes rose, but came well off highs, while the Russell 2000 skidded to a 2023 low as bank stocks tumbled. On a more positive note, the index reversed modestly higher on Friday.

The Nasdaq composite rose strongly, holding above all the moving averages despite being turned back at the 12,000 level. The S&P 500 reclaimed its 200-day line this past week, but then hit resistance at the 50-day line and tested its 200-day again late in the week. Still, it did hold the 200-day and moved back above the 21-day line. The Dow Jones also had a decent gain, despite tumbling back below the 200-day. Even the Russell 2000 ended slightly higher.

The rally attempt has been concentrated in growth, and even that’s been concentrated in a relatively small number of megacaps and chip names such as Apple and Microsoft. Market breadth has been anemic, with losers outnumbering winners.

Chips have been strong, but faced some selling on Friday. That was no big deal for extended winners such as Nvidia (NVDA), but it was damaging to the likes of Monolithic Power Systems (MPWR) and STMicroelectronics (STM).

Homebuilders and a few related plays look solid. Some restaurants are doing well. Medical products and systems makers are starting to perk up. Some software plays besides Microsoft are perking up, including Salesforce.com (CRM) and PANW stock.

Gold has been a big winner amid the bank crisis.

If the bank crisis fades, then perhaps the market rally attempt will broaden out and strengthen, with one or more of the major indexes staging a follow-through day. In that scenario, investors would also want to see the Nasdaq move above 12,000, the S&P 500 reclaim the 50-day and the Dow Jones back above the 200-day. Keep in mind that if bank woes ease and Treasury yields rebound, then big-cap growth names may no longer be viewed as safe havens.

Many bank stocks slashed Friday losses or even turned higher for the day or week, a glimmer of hope on that front. But financials have held up or rebounded at various points in the past few weeks, only to break decisively lower soon after.

If the bank crisis worsens, then even the market leaders might start to crumble. It’s also possible that the market continues to show whipsaw action, surging higher or lower and then reversing.

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What To Do Now

There have been some strong performers in recent weeks. If you got into some of those names, you could be having a strong start to the year. But many stocks showing promising action have stalled, whipsawed or broken down. Though the major indexes rose for the week, anyone buying near the highs on Wednesday or Thursday likely is sitting on losses.

Investors should be keeping exposure light and be extremely cautious about any new buys. You might consider taking partial profits on winners, even those that have done quite well, to preserve gains in a volatile environment. Be quick to cut losses.

Market conditions could change quickly, so investors should be ready to act with up-to-date watchlists. When the market does start to show real strength, investors should step in gradually.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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